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The price paid for borrowing money. It is expressed as a percentage rate over a period of time and reflects the rate of exchange of present consumption for future consumption. Also, a share or title in property.


Money that is paid in exchange for borrowing or using another person's or organization's money. Interest is calculated as a percentage of the money borrowed. There are two kinds of interest, simple interest and compound interest. In simple interest, the interest is calculated only over the original principal amount. For example, if one borrows $1,000 at 3% interest, the interest is $30 (3% of $1,000) each time it is calculated. In compound interest, interest previously paid is included in the calculation of future interest. For example, with the above loan, interest paid in the first month is $30 (3% of $1,000), in the second month it is $30.90 (3% of $1,030), and so forth. Compound interest is more common because it yields more for the lender.


1. Payment for the use of borrowed money.
2. An investor's equity in a business.


Interest is what you pay to borrow money using a loan, credit card, or line of credit. It is calculated at either a fixed or variable rate that's expressed as a percentage of the amount you borrow, pegged to a specific time period.

For example, you may pay 1.2% interest monthly on the unpaid balance of your credit card.

Interest also refers to the income, figured as a percentage of principal, that you're paid for purchasing a bond, keeping money in a bank account, or making other interest-paying investments.

If it is simple interest, earnings are figured on the principal. If it is compound interest, the earnings are added to the principal to form a new base on which future income is calculated.

Interest is also a share or right in a property or asset. For example, if you are half-owner of a vacation home, you have a 50% interest.


the charge made for borrowing money in the form of a LOAN. Interest is payable on a number of short-term and long-term borrowing forms including LOANS, OVERDRAFTS, MORTGAGES, INSTALMENT CREDIT, LEASING, LOAN STOCK, DEBENTURES, BONDS, TREASURY BILLS and BILLS OF EXCHANGE.

Interest charges may be fixed or variable and payable weekly, monthly or annually depending on the size of the loan and the length of the loan period. When a loan is extended on a fixed-interest basis the rate remains unchanged throughout the life of the loan. However, in times of inflation the real or effective interest rate as opposed to the loan's agreed or nominal interest rate will fall as inflation reduces the PURCHASING POWER of money. In this case, where the lender is able to vary the interest charge, then the interest rate can be raised to offset the effects of inflation. For this reason, whereas most short-term loans are extended on fixed-interest terms, variable terms are usually applied to long-term loans.

Interest may be computed on a simple or compound basis. Simple interest is based only on the original amount of the loan, whereas compound interest is based on the original amount of the loan plus previous accumulated interest. For example, a £100 loan paying simple interest at 10% would accumulate to £110 at the end of the first year and £120 (i.e. £100 + £10 + £10) at the end of the second, whereas with compound interest the loan would accumulate to £121 at the end of the second year (i.e. £100 + £10 + £11 [10% of £110]). See INTEREST RATE, APR.


the charge made for borrowing money in the form of a LOAN. Interest is payable on a number of short-term and long-term borrowing forms, including BANK LOANS, MORTGAGES, INSTALMENT CREDIT, LEASING, LOAN STOCK, DEBENTURES, BONDS, TREASURY BILLS and BILLS OF EXCHANGE.

Lenders require a NOMINAL INTEREST RATE that compensates them for the effects of INFLATION in reducing the PURCHASING POWER of any sums that they lend, so that the real or EFFECTIVE INTEREST RATES provide an adequate reward to lenders for forgoing current consumption and for the risk of default introduced in lending out money. In aggregate terms, interest is a source of income and is thus included as part of NATIONAL INCOME. In the THEORY OF SUPPLY, interest is a payment for the use of CAPITAL as a FACTOR OF PRODUCTION. See INTEREST RATE.


Sums paid or earned for the use of money.

References in periodicals archive ?
A spokeswoman for the office of the Public Services Ombudsman for Wales said: "Our view is that the obligation to declare an interest arises if a member has a personal interest in a matter which is being considered at a meeting that they attend.
The Code of Conduct says councillors have to declare an interest when making a decision affecting "your well-being or financial position, or that of a person with whom you live, or any person with whom you have a close personal association".
I know a great number of people and if I had to declare an interest every time one of them made a planning application, there would be no point in my being on the planning committee.
He said, 'I didn't declare an interest officially because it is a matter of public record I was appointed chairman of the company - it's no secret.
The cabinet approved the loan deal and Mr Clement, a JP, who declared an interest in another item relating to change of use of a former magistrates court building, did not declare an interest.
The report says that on a number of occasions Mr Edwards did not declare an interest when applications relating to land at Aberbechan, near Newtown were dis-cussed.
The council's Finance Director, David Elis-Williams, accused Coun Thomas of failing to declare an interest at a meeting of the Social Inclusion Committee on November 23, 2000, in relation to an item on housing grants policy.
Mr Evans maintains he has done nothing wrong and had been advised by council chief executive Owen Watkin and other officials that he had no need to declare an interest.
Crystal Palace will be first to declare an interest, but Le Tissier may prefer to wait for more offers to come in.
Mr Jones said: ``He stated that he did not believe it was necessary for him to declare an interest as the two meetings of the Social Inclusion Committee only discussed the policy of the prioritisation of housing grant applications and not the allocation of work to contractors.
9 hectares of development land at Tregaron in February last year and had taken advice from council officers on whether he should declare an interest.
As far as the Unitary Development Plan is concerned I have received legal advice all along from council officers that there was no need for me to declare an interest in this particular area of land, of some 65 acres, unless the land itself was under consideration.